What is D&O Insurance?
Directors and officers liability Insurance (often called "D&O") is liability insurance payable to the directors and officers of a company, or to the organization(s) itself, as indemnification (reimbursement) for losses or advancement of defense costs in the event an insured suffers such a loss as a result of a legal action brought for alleged wrongful acts in their capacity as directors and officers.
Such coverage can extend to defense costs arising out of criminal and regulatory investigations/trials as well; in fact, often civil and criminal actions are brought against directors/officers simultaneously. Intentional illegal acts, however, are typically not covered under D&O policies.
D&O Insurance Coverage
Under the "traditional" D&O policy applied to "public companies" (those having securities trading under national securities exchanges etc.), there are three (3) insuring clauses. These insuring clauses are termed: Side-A or "non-indemnified"; Side-B; or "indemnified"; and Side-C; "entity securities coverage". D&O policies may also provide an additional Side-D clause, which provides for a sublimit for investigative costs coverage related to a shareholder derivative demand. In detail, the coverage clauses provide the following:
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